Whitney Tilson the founder of the New York based hedge fund Kase Capital Management recently shared the slide deck of his “Robin Hood” Investor’s Conference presentation. The slide deck not only gave a peek into Tilson’s view on the economy and markets, but also revealed his top long/short ideas and the reasoning behind them. Whitney Tilson is cautiously positioned with very low long exposure because he thinks that the markets are in the overvalued zone. He also thinks that investors are complacent with the CBOE Volatility Index trading at decade lows. He thinks that the markets are in for volatile times given the high degree of uncertainty due the Trump’s win, Brexit as well as rising populism across the world. Tilson also summarizes by saying that while Trump may be good for stocks in the short term, he may not be favourable over the long term. In the article below, we take a detailed look at three short and one long idea.
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Whitney Tilson has Exact Sciences Corporation (NASDAQ:EXAS) as his biggest short position and recently added to his position after the biggest insider sales of $25 million. He had in fact recommended this stock as a short two years ago when the price was $23.86, but had not covered his position despite the stock falling to as low as $5. The stock declined after the USA Preventive Services Task Force had not included the company’s only product “Cologuard” as a recommended test for Colorectal Cancer Screening. The stock recovered in July after the same task force gave an A grade to Cologuard and six other screening methods.
Whitney Tilson thinks that the stock is still a great short and that the target price of the stock is $3 a share (cash on its balance sheet). The main reason behind his bearishness on the stock is that he does not think that the company’s test is better than the mainstream “FIT” test, which is much cheaper (23 times cheaper) and covered by most insurers. Competition is increasing for Exact Sciences’ Corporation (NASDAQ:EXAS) product and the commercial payor adoption for Cologuard will be much slower than what is priced into the stock. The financials of this company are pretty bad with losses accelerating as the company spends heavily on marketing, only to generate a modest amount of revenues. The quarterly burn of Exact Sciences Corporation (NASDAQ:EXAS) was $154 million in 2015.